We have all seen many businesses scale up and grow in their early years and become market leaders. That is to say they acquire the largest market share in the industry. That continues for a few years, or perhaps even decades, until they hit some kind of roadblock. The roadblock could be of many kinds, but what next? How does the company revive its fortune and continue to grow, despite the new challenges?
In order to understand this, let us go over how companies achieve market leadership in the first place. It would vary by industry and company, but I think we can all agree that most companies succeed in the marketplace, because of a compelling and differentiated product offering that gains acceptance and preference over its competitors. And that is usually because companies spot a new customer need or segment that is untapped and also because they innovate in creating a new product just for that market.
So, identifying the right market or consumer segment and innovating to fulfil an unmet need is key to winning in business. Over time, the company needs to repeat this strategy and operation, in various new segments in order to strengthen its position as well as to pre-empt competition. And if it has done all of this right, it soon becomes the market leader in the business.
Why is it that many companies, having achieved market leadership, are also considered industry leaders? It doesn’t automatically follow that every market leader is an industry leader, but some companies actually do manage to achieve that goal as well. I think it is because over years of their operation, they acquire expertise that is valued by the industry and they begin to lead or set new benchmarks for the industry. Once they reach this stage, many companies are also willing to go easy on the competition, and actually cooperate with their competitors and peers in the industry in order to grow the market and find new opportunities.
One could then say that this industry has reached a level of maturity, and it needs new impetus for growth. This is quite common in the technology industry as well as in automobiles, and I think national policy too might have a role to play in this. I am thinking of how SAP, for example, works with so many other technology companies in being able to deliver their solution to large clients. Or take Tesla, already a market leader in EVs both in the US as well as in international markets. By agreeing to share its EV charging infrastructure with Ford as was announced recently, Tesla is actually hastening the pace of EV adoption across the US.
Before you think that this phenomenon is not present in the packaged consumer goods industry, let me direct you to the Scotch Whisky industry, in UK and globally. By virtue of being the world’s largest wines and spirits company, as well as having the largest portfolio of premium Scotch Whisky brands, Diageo is the undisputed industry leader. It would have huge influence in the way Scotch Whisky brands are created and promoted, and in even formulating new industry policies along with the Scotch Whisky Association in Scotland.
Returning to the subject of roadblocks or at the very least, roadbumps, every company has had to face them some time or the other. These can affect market and industry leaders as well. What kind of obstacles or headwinds can a market leader possibly face, you might wonder.
The most obvious one is a huge change in technology which redefines the entire industry. Think of EVs disrupting the automobile industry, with autonomous driving and mobility as a service to follow. Such a tectonic shift in the industry usually throws up a new leader in our midst, such as Tesla, in automobiles. Market leaders and even industry leaders aren’t always so nimble and forward-looking to be able to anticipate the next big leap and be ready for it.
Unless the market leading company has a culture of innovation built into its organization and is steeped in it, it fails to be prepared for the radical shift that is required. I have mentioned Kodak before in my blog posts, where even the inventor of the world’s first digital camera failed to anticipate and capitalize on the huge market that would open up for it. Nokia in mobile handsets is another example of a global industry leader that wasn’t prepared for the smartphone era that would be ushered in by Apple’s iPhone.
The other kind of challenge that even market leaders face is a change in consumer’s tastes and lifestyles. This is easier to anticipate perhaps because it is more gradual. But it is also easy to miss, if only because changing company strategy in response to changing consumer preferences is tricky to judge and to act on. For example, the change might be visible only in one particular segment; is that a large enough opportunity for the company to shift gears? Take the vast market potential for ready-to-cook and ready-to-eat dishes in a country such as India. When I worked briefly at Perfect Relations, Delhi, I had recommended that their client, Nestle, focus on this particular category of foods through Maggi, as I could see a growing need for this type of product offering, especially among urban households comprising young, working couples. This was way back in 2006-07. Today, the market is flooded with such options from many other companies and brands, such as Gits, MTR, Knorr, possibly even Saffola, etc. Nestle is nowhere in this segment yet, at least not from what I observe in supermarkets in Goa or in advertising.
A third kind of headwind that a market leader may face is owing to their own complacency. Often, because a market or industry leader has achieved an undisputed position in the industry, the leadership is taken for granted and the brand is neglected. There is little to no investment in new innovations, and certainly none in brand-building, with the result that the brand suffers. This is quite common with luxury brands where, having tasted success, the company tends to ignore intrinsic brand strengths. Over time, such brands become mere status symbols, emptied of their inherent strengths and values, before fading into the background. In my opinion, iconic luxury car brands such as BMW and Mercedes-Benz have been in this position for a few decades now. You would think that the technology disruption through EVs that the industry is witnessing would have jolted these luxury car brands out of their slumber and forced them to refocus on the strength of their respective brands. But that is not what I observe; they have gone into EVs, without being able to connect their new EV products with the main brand.
In this context, I would like to consider a leading luxury brand in the wristwatch industry. Rolex is by far the market leader among luxury Swiss watch brands in 2022 according to Statista. And that should come as no surprise to anyone, given how accurate, reliable, and exquisitely crafted Rolex watches are. However, Rolex has its task cut out, in being able to grow the market for its luxury watches, as well as retain and build on its leadership in the industry. Over the years, this brand too has become a status symbol of the wealthy and the famous.
What’s more, just as the Swiss wristwatch industry was rocked by a new technology in the 1980s, it will have to face up to new and emerging challenges today and in the future. Then, the Japanese invented quartz technology, which was recognized as more accurate in time-keeping and took the world by storm. The Swiss wristwatch industry really had to innovate in order to fight back to even retain their share of the luxury market. Today, it appears that Swiss watchmakers do offer quartz wristwatches, albeit at the lower and middle end of the market, and they also export quartz movements.
In my view, the new headwinds for a brand such as Rolex are in the form of technology (smart watches) as also changing customer lifestyles and preferences. The fight is as much for relevance as it is for image, considering that Rolex is an old, established heritage brand. Given these challenges, I explore how Rolex can strengthen its leadership and grow its business as well as that of the entire Swiss wristwatch industry. You may read my brand strategy as well as brand communication ideas for Rolex by clicking the link below.
How Rolex Can Make Time Matter
As we can see market leadership cannot be taken for granted. It is not guaranteed forever, either. Companies have to anticipate changes on the horizon, innovate and fight hard every inch of the way, in order to stay competitive. Sometimes the fate of an entire industry hangs in the balance.
Peripatetic Perch 